Monday, September 15, 2008

An Indian Blogger Understands Trade Policy

Sauvik Chakraverti (Libertarian) writes in Antidote, India, (HERE:)

"On Kamal Nath Once Again"

"This is the darndest yet:

Our commerce minister, Kamal Nath, has made a public statement that the growth of India’s exports is being stymied by the ministry of finance under P Chidambaram.

K Nath is aiming at 200 billion rupees of exports – but this target cannot be achieved because of Chidambaram’s intransigence on certain policy issues.

Note that the commerce minister’s only goal is to increase exports. He does not want to increase imports – which is why he walked out of the WTO and wrecked all prospects for freer international trade.

India is actually leading a band of poverty-stricken Third World countries at the WTO – all of whom want to export everything and import nothing.

The guiding economic theory for them is a spurious “balance of payments” kind of argument: exports “improve” the BoP; imports don’t.

This is the false idea of “mercantilism” that Adam Smith refuted. Like Kamal Nath, the mercantilists also thought that exports were better than imports because they led to an inflow of gold. Imports led to a gold outflow – and surely that was bad for a nation. Mercantilists therefore attacked the Honourable East India Company, which was exporting gold in order to import and profitably sell spices – mere luxuries and fripperies, according to these critics.

Adam Smith’s central argument was that the “wealth of a nation” consisted in the properties and possessions of its people. These are best augmented through imports. The country should therefore export whatever it has an advantage in – and import the rest. He called for free trade – and this was achieved thanks to Cobden, Bright and the Manchesterites some 50 years later"

Follow the link: to read the rest of this excellent piece - minus some minor quibbles.

If only the rest of the politicians in all countries understood the fallacies of mercantile political economy. Sauvik Chakraverti understands the realities of the world's obsessions with 'jealousies of trade', a disease that infects every trading nation, and which was exposed by David Hume and Adam Smith in the 18th century.


Post a Comment

<< Home